2008/08/01 by M. Daniele Paserman · 6 citations
Economics, Econometrics and Finance · Social Sciences · Business, Management and Accounting · #Economic theories and models #Gender, Labor, and Family Dynamics #Financial Literacy, Pension, Retirement Analysis
paper · doi:10.1111/j.1468-0297.2008.02175.x
This article estimates the degree of hyperbolic discounting in a job search model quantitatively, using data on unemployment spells and accepted wages from the NLSY. The results point to a substantial degree of hyperbolic discounting for low and medium wage workers. The structural estimates are then used to evaluate alternative policy interventions aimed at reducing unemployment. The estimated effects of a given policy can vary by up to 40%, depending on the assumed type of time discounting. Some interventions may raise the long‐run utility of hyperbolic workers, and at the same time reduce unemployment duration and lower government expenditures.